Planning to increase your prices but too worried about customer backlash?
Follow these steps to write a successful price increase letter to customers.
There comes a time for every business to raise its prices, the foremost reason being to generate higher revenue to continue offering constant or better value. However, many business owners fear that a price hike will turn loyal customers away from their brand.
It's true - poorly executed price increase plans can lead to customer backlash and consequently massive anxiety in business owners. But, there are ways to turn the not-so-pleasant news into something that your customers will accept without being flustered.
This post will share tips for writing a price increase letter to customers that won't cause massive dissatisfaction in your customers and smoothen the route to new price plans.
5 Signs It's Time to Increase Prices
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How do you decide if it's the right time to increase your prices? There must be a signal, right?
Not really.
If you think you are offering appropriate value to your customers with every price bump, it's up to you when you want to update your price plans. However, increasing prices too frequently can work against your business and cause a reduction in new customers.
These are five signs that indicate it's time to increase your prices.
1. A Price Increase is Due
Increase your prices if you haven't in a long time.
It's a simple concept, but is it fair? Of course. If you ask a fair price for the value you are offering, it's absolutely fair.
On the other hand, when you are offering something at a lower price, your clients might become suspicious of the quality you are delivering. So if your services are currently in demand, raising prices will have little effect on demand.
2. You're Offering Value Higher Than Prices
If you think you are offering value higher than your prices, you should revise your prices to account for the value. You don't have to overshoot your prices, but you don't want to undersell either.
Consider a reasonable raise that can be justified by the value you are offering. If you are adding more value to your services or products, you can show it with a price bump and mention it in the price increase letter.
3. You Have a Firm Control Over the Market
If you know the market and your place in it, you are in a better position to judge whether it is time for a price increase. A price bump only works if you have control over the market. If you aren't well established or trusted, the increase will work against you, and the competition will take advantage of the situation.
4. You Need Cash to Grow
If an insufficiency of cash affects your growth, you should reevaluate your prices. You need to sell your products or services with enough margin to fund your growth in the market. Keep in mind it is essential to keep progressing and developing to stay ahead of your competition.
5. Your Customers Find You Cheap
If your customers tell you that your services are cheaper than they expected — listen to them. Keeping your prices low might mean you are undervaluing business and consequently making your customers skeptical about your brand.
Your customers may start thinking that your products or services are not as good as your pricier competitors, and that will only damage your brand's reputation. Those who want the best will consider your business if your prices reflect the value you are offering.
6 Tips to Write a Price Increase Letter
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So is it time to increase your prices? We will help you write a price increase letter to customers. Don't worry; you don't have to lose customers along the way.
Here are six steps to write a price increase letter that won't disappoint your customers.
1. Announce, Don't Appease
If you want to raise your prices, announce it to your customers. You don't have to sugarcoat the announcement as it will only confuse them about the intention behind the increase.
Your price increase letter should announce, and not appease. It should be to the point and honest, without any hesitation or apologies. If you are not truthful or have doubts about the price increase yourself, your customers will push back the price hike. They might even ask you to make an exception for them.
Being direct will help them trust your decision. Before the people think anything else, assure them of the continuing or increased value you are offering.
2. Be Transparent
When writing a price increase letter to customers, even the most confident business owners need to follow a well-thought-out strategy. Most find it an unpleasant task that they need to get over while causing minimum perturbation. Consequently, they try to beat around the bush to lessen the impact.
Remember, honesty is a big part of any business. Not being straightforward with clients will only arouse suspicion in them. Therefore, it is best not to lie to your customers with the intent to dilute the negative impact of the news.
Most of the time, business owners don't realize that they can use a price increase event to their advantage. While making the new price plan, your company goes through plans and decisions which you can communicate to your audience.
By doing this, you can be transparent and explain the value you can provide with the new plan. This way, your customers will trust you even more than before. However, you don't want to promise anything you don't intend to deliver.
In addition, when you have made the improvements after the price bump, update your customers again to show them that you have delivered. Nowadays, customers know when the brand is trying to manipulate them, and they appreciate it when you are transparent with them.
3. Provide a Value Narrative
Once you get straight to the point and announce the price increase, get to the next point - value. You can turn this seemingly bad news into a value narrative in your price increase letter.
Perhaps tell a vivid story or include a short note stating the reason behind the price increase. This narrative should be customer-centric and show that your customers will benefit from increased prices.
Your customers might not be interested in rising production costs, but most of them will care about paying fair wages to labor. So, tell your consumers that by supporting the price increase, they will make their contribution to fair work wages and help you avoid labor exploitation.
If you have no big agenda behind the increase, you can still turn the announcement into positive news. The letter can explain this step as an upgrade or a long-needed boost which will allow your company to introduce new plans and offers to your loyal customers.
For example, Netflix increased prices in the US in 2020 - its standard plan to $14/month and its premium tier to $18/month. On this occasion, a Netflix spokesperson commented, "We're updating our prices so that we can continue to offer more variety of TV shows and films -- in addition to our great fall lineup."
Similarly, you can inform your customers that the brand can continue maintaining quality levels only if it raises prices. This argument shows that you chose quality for your customers, strengthening your reputation in the marketplace.
4. Be Concise
Whichever strategy you employ, your value narrative should be brief and concise. It should provide a precise explanation for the increase that places your customers at the center. Otherwise, your clients may turn to your competitors, and you don't want that, do you?
Your explanation does not have to discuss the little details of the increase as it will start to sound defensive. A well-written price increase letter will convey facts and explain that the company has taken this step while keeping customer interests in mind.
5. Make the Letter Sound Natural
An apathetic price increase letter will not resonate with your loyal customers and will be met with a cold response. Therefore, try to make the announcement more personalized by appreciating the customers for their support and giving them a way to contact you.
If you have a small to medium-sized customer base, you can create highly personalized letters or emails to sound more genuine. While if you have an extensive customer base, try to make it precise, easy to read, and sincere.
Make the letter sound like a conversation with the customers, sharing your reasons, goals, and values with them. It might also help to use your individual account or name rather than a team account for the announcement.
In addition, you can segment the letter by how long a customer has been with you and offer something special for their loyalty to the brand, such as a one-month extension of the old prices.
6. Set the Deadline
If you are still worried about a backlash, don't increase the prices immediately. Instead, set a deadline for a month or more from the announcement date. This can become a saving opportunity for the customers as they will be able to buy or subscribe to your services at the old rates for a while.
You can even spice things up and offer an annual plan at the old rates, which will boost revenue for your company even before the price increase. It will also help you gain more loyal customers who are satisfied with their purchases.
Final Thoughts
When you decide to increase prices, the hardest part is usually managing customers and avoiding backlash. However, it doesn't have to be as complicated as it seems.
Your price increase letter to customers should be brief, concise, and genuine. It should be centered on customer interest and show concern for their welfare. While an automated letter will convey the same news, a more personalized email will ensure positive reception and improve customer loyalty.
Cover Photo by Tech Daily on Unsplash
